controlling (1)

Made by:Archi Garg 098

Shreya Saxena 099

Ripudaman 100 Renu Meena 101

Rakesh 102

CONTROLLING

CONTENTS:What is controlling??

Why is control important??

Planning and controlling: Parallel Functions…

Controlling process…

Tools for controlling organizational performance…

Contemporary issues in control!!!

A four-step process including establishment of objectives and standards, measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards.

1.Establishment of standards:

3 questions arises:WHEREWHATWHENWhat are STANDARDS????TYPES OF STANDARDS:i) Measurable/ Tangible standards: Eg. In the form of cost, output, expenditure, time,

profit etc.ii) Non Measurable/ Intangible standards:Eg. Performance of a manager, deviation of

workers, their attitude towards a concern

2. Measuring actual performance:

2 questions arises: How we measure?? What we measure??

i) HOW WE MEASURE ??

It can be done through various sources:Personal observation, statistical reports, oral reports, written reports etc..

ii) WHAT WE MEASURE??What people in the organization will attempt to excel

at? Tangible Standards: measurement is easy

Eg. BudgetsCostsOutputSales

Intangible Standards: measurement through subjective measuresEg. Employees

PerformanceSatisfaction

Measurements must be accurate enough to spot deviations or variances between what really occurs and what is most desired.

Without measurement, effective control is not possible.

3. Comparing actual performance against standards:The comparison of actual performance with

desired performance establishes the need for action.

3 things need to be find out: Range of variation Extent of deviation Cause of deviation

i) Range of variation :

ii) Extent of Deviation : Minor Deviations Major Deviations

iii) Cause of Deviation : Planning Coordination Implementation Supervision Communication

4. Taking managerial actions: 3 Courses of Action: Doing Nothing Correcting actual (current) performance Revising the standard

i) Doing nothingOnly if deviation is judged to be insignificant.

ii) Correcting actual (current) performanceImmediate corrective actionBasic corrective action

iii) Revising the standardExamining the standard to ascertain whether or

not the standard is realistic, fair, and achievable:UpholdingResetting

TOOLS FOR CONTROLLING TOOLS FOR CONTROLLING

ORGANIZATIONAL ORGANIZATIONAL PERFORMANCEPERFORMANCE

TYPES OF CONTROL: TYPES OF CONTROL:

•Budgetary control •Financial ratio analysis•Break even analysis •Audits•Report and personal observations

•PERT & CPM methods•Human resource accounting•Economic value added(EVA)•Market value added(MVA)•Balanced scorecard•Benchmarking•Management information system(MIS)

BUDGETARY CONTROLBUDGET: A budget is a financially expressed statement

of anticipated results during a designated time period(usually 1 year).

BUDGETARY CONTROL: It is a system of controlling costs which

includes the preparation of budgets, coordinating the departmentsand establishing responsibility, comparing the actual performance with budgeted and acting upon resultsto achieve maximum profitability.

FINANCIAL RATIO ANALYSIS

It examines the relationship between specific figures on the financial statements and helps explain the significance of those figures:

LIQUIDITY RATIOS:It measure an organization's ability to generate cash.

PROFITABILITY RATIOS:It measures an organization‘s ability to generate profits.

DEBT RATIOS: It measure an organization's ability to pay its debts.

ACTIVITY RATIOS: It measure an organization's efficiency in operations and use of assets 

PERT:  PERT stands for Program Evaluation Review Technique. A PERT chart is a project management tool used to schedule, organize, and coordinate tasks within a project. A PERT chart presents a graphic illustration of a project as a network diagram consisting of numbered nodes (either circles or rectangles) representing events, or milestones in the project linked by labeled vectors (directional lines) representing tasks in the project. The direction of the arrows on the lines indicates the sequence of tasks.

PERT identifies and controls the many separate events in complex projects.

CPM: The Critical Path Method (CPM) is one of several related techniques for doing project planning. CPM is for projects that are made up of a number of individual "activities." If some of the activities require other activities to finish before they can start, then the project becomes a complex web of activities.CPM can help you figure out:

i) how long your complex project will take to complete

ii) which activities are "critical," meaning that they have to be done on time or else the whole project will take longer

HRA: Human Resource Accounting may be defined as the measurement and reporting of the cost and value of people as organizational resources. It involves accounting for investment in people and their replacement costs, as well as accounting for the economic values of people to an organization.

Other Measures:

Economic Value Added (EVA): How much value is created by what a company does with its assets, less any capital investments in those assets: the rate of return earned over and above the cost of capital.

Market Value Added (MVA): The value that the stock market places on a firm’s past and expected capital investment projects

Balanced Scorecard: A measurement tool that uses goals set by managers in four areas to measure a company’s performance: Financial, customer, internal processes, and people/innovation/growth assets

Benchmarking: The search for the best practices among competitors or non competitors that lead to their superior performance.

Information Controls: Management Information Systems (MIS) : A system used to provide management with needed information on a regular basis.

Connection between Employees and Customers

Importance of controlling these interactions:

Ques > How to control this interaction??Answer > Service profit chain

The service sequence from employees to customers to profit: service capability affects service value which impacts on customer satisfaction that, in turn, leads to customer loyalty in the form of repeat business (profit).

1.Workplace privacy versus workplace monitoring

Workplace privacy Not to read Personal or Confidential e-mails Not to tap telephone Not to monitor an employee in dressing room

workplace monitoring Employees are hired to work (productivity) To avoid risk of hostile workplace environment To maintain secrecy of company intellectual property protection

2. Employee TheftThe unauthorized taking of company property by

employees for their personal use.

3. Workplace violenceAnger, rage, and violence in the workplace is

affecting employee productivity.Factors contributing to workplace violence:

4. Corporate GovernanceThe system used to govern a corporation so

that the interests of the corporate owners are protected.